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10. COMMITMENTS AND CONTINGENCIES
 9 Months Ended
Sep. 30, 2015
Notes to Financial Statements  
NOTE 10. COMMITMENTS AND CONTINGENCIES

Lease Commitments

 

In September of 2014 the Company entered into a lease agreement for office and warehouse space in Fredrick Maryland. As part of the lease agreement, the Company received a rent holiday in the first 5 months of the lease.  The lease also provides for an escalation clause where the Company will be subject to an annual rent increase of 3%, year over year.  The lease expires on January 31, 2018.  The Company accounts for the lease using the straight line method and recorded $34,281 in rent expense for the nine months ended September 30, 2015.  Approximate minimum annual rents under lease are as follows:

 

Twelve Month Period Ending September 30,   Amount  
       
2016   $ 51,000  
2017     53,000  
2018     18,000  
    $ 122,000  

 

Purchase Commitments

 

On October 15, 2014, the Company entered into a manufacturing and development agreement with RG Group, Inc.  For the nine months ended September 30, 2015, RG Group, Inc. manufactured substantially all of the Company’s equipment.  During the quarter ended September 30, 2015, the Company placed an order with RG Group for the purchase of inventory in the amount of $5,392,493.  In addition, the Company made a 10% deposit on the order in the amount of $539,249.  As of September 30, 2015, the balance of the deposit was $529,142.